Sky (UK)

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Sky is the UK's foremost pay TV service and was the world's first satellite broadcasting business when it was launched by Rupert Murdoch's News Corporation in 1989. After a very shaky start, British Sky Broadcasting (or BSkyB) eventually established itself as one of the country's most profitable broadcasters, buying up rights to many of the UK's biggest sporting events. Almost a decade after its launch the service became the UK's first digital broadcaster, and now delivers more than 500 audio and video channels direct to around a third of all UK households. It has also diversified into broadband, telecoms and even (briefly) a music download service. In 2009, it was named as Britain's Most Admired Company by business magazine Management Today. Following the break-up of News Corporation in 2013, Sky's largest shareholder is now 21st Century Fox with a 39% stake. In 2014, the company acquired control of Fox's separate Sky-branded satellite broadcast subsidiaries in Italy and Germany to create a single Sky Europe entity. Two years later, Fox issued a new offer to take full control of the enlarged Sky business. However, intense opposition to the Murdoch empire in political and media circles made it appear increasingly unlikely that regulatory approval would be forthcoming. The Murdochs finally appeared to accept defeat in 2017. At the end of that year, they announced a shock decision to sell the bulk of 21st Century Fox, including Sky, to the Walt Disney Company. Assuming the deal goes through, Disney will take full control of Sky in late 2018 or early 2019.

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Adbrands Weekly Update 12th Jul 2018: The three-way battle between Fox, Disney and Comcast rages on. In a move that was intended to crush a rival offer from Comcast, 21st Century Fox raised its offer to acquire the shares it doesn't own in European satellite broadcaster Sky to £14 per share, valuing the business at £24.5bn. Comcast had previously offered £12.50 per share, topping Fox's earlier offer of £10.75. Only a day later, though, Comcast raised its own offer to £14.75, or a valuation of £26bn. Fox's intention is to take full control of Sky and then sell that business and most of its other entertainment assets to Disney. This week, Fox received a firm green light from UK regulators for the purchase of Sky, provided it commits to sell the Sky News channel to Disney or another buyer. Comcast is bidding separately for both Sky and also the whole Fox entertainment portfolio. It now looks increasingly likely that Sky and the other assets could end up with separate owners; with Comcast taking Sky and Disney the rest of the portfolio.

Adbrands Weekly Update 7th Jun 2018: After months if not years of indecision, the UK's competition regulator gave a conditional green light to the proposed acquisition by 21st Century Fox of the shares it doesn't already own in satellite broadcaster Sky. As anticipated, there is one key proviso: Sky News must be ring-fenced for the duration of its ownership by Fox to preserve its editorial independence, and reduce the influence of the Murdoch family, who also own two of the UK's biggest selling newspapers via News Corporation. The significance of the Government's announcement is that it reduces any additional complications in Fox's plans to sell off Sky and most of its US-based entertainment assets. Disney already has a deal on the table; Comcast is preparing to issue a counter-offer of its own. The UK Government also said it has no objections to Comcast's bid for Sky. As a result, Fox can potentially proceed with its full buyout of Sky and then sell off the entirety of its entertainment portfolio rather than require a buyer to negotiate separately for the outstanding shares in Sky. A bidding war between Disney and Comcast looks likely.

Adbrands Weekly Update 26th Apr 2018: Comcast threw down the gauntlet to 21st Century Fox and Disney with a formal offer to acquire European satellite broadcaster Sky for £22bn. That's a significant premium to the offer from Fox, which is worth just under £19bn and is also complicated by long-standing regulatory issues. Sky's board welcomed Comcast's proposal and has withdrawn its recommendation of the Fox bid. "Sky will be our platform for growth across Europe," said Comcast CEO Brian Roberts. "The combined customer base of approximately 52m will allow us to invest more in original and acquired programming and innovation as we strive to deliver a truly differentiated customer experience." He added that Comcast would make "a series of important binding commitments which will underpin our future investment in Sky and the UK". These would include investment in Sky News and a guarantee to preserve its editorial independence. Comcast had previously made a direct approach to Fox for its whole entertainment portfolio, but was turned down in favour of Disney. As far as Sky is concerned, the ball is now in Disney's court. Fox had planned to take full control of Sky and then sell it on to Disney. The latter must now consider whether to top Comcast's offer, or console itself with just the rest of the Fox media assets. Yet, Comcast is also reported to be mulling a renewed approach for the rest of the the Fox portfolio, possibly involving an appeal to that group's public shareholders to reject the Disney deal when it is put to a vote this summer. 

Adbrands Weekly Update 5th Apr 2018: In a bid to clear the roadblock over its bid to take full control of European satellite broadcaster Sky, 21st Century Fox has proposed the sale of Sky News to Walt Disney. It's hoped this might ease regulators' concerns over the Murdoch family's influence on UK news reportage. If so, Fox could complete its takeover of Sky, and then sell on the business to either Disney as already agreed, or alternatively to separate bidder Comcast. Disney has agreed to acquire Sky News even if it doesn't end up with control of the rest of Sky.

Adbrands Weekly Update 1st Mar 2018: In an intriguing new development in the Fox-Sky takeover saga, Comcast announced a plan to buy the European satellite broadcaster outright for £22.1bn (almost $31bn), a significant increase on Sky's current valuation, and also well above the price at which Fox is offering to buy the shares it doesn't already own. Comcast's smart move provides a possible solution to the ongoing battle between Fox and UK regulators over Sky. Fox had hoped to buy the outstanding Sky shares before selling the business on to Disney, along with other assets. However that plan looks unlikely to get past regulators, which means Disney would have to accept Fox's existing 39% stake and then bid for the rest in a separate process. Comcast, on the other hand, says it would accept a minority partner in Sky - Fox in the short-term, and then Disney - so the ball is now back into Disney's court. Does it relinquish Sky to Comcast, or does it make another even higher offer of its own for the public Sky shares?

Adbrands Weekly Update 8th Feb 2018: Debbie Klein, head of WCRS parent Engine Group in Europe and Asia, has jumped the tracks to take up a newly created position at long-time client Sky, the satellite broadcaster currently controlled by 21st Century Fox but soon expected to become a unit of Walt Disney. Klein has been named as group chief marketing & corporate affairs officer. No date has yet been set for her departure; she will stay at Engine until her successor has been chosen.

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Free for all users | see full profile for current activities: Rupert Murdoch's business career has been punctuated by a series of audacious gambles, and Sky was certainly one of the biggest. By the end of the 1980s, Murdoch already had considerable experience of the television business, originally in Australia, then as one of the early investors in the UK's London Weekend Television during the 1970s. [See News Corporation profile]. However the acquisition of Times Newspapers in 1981, added to News of the World and The Sun which he already owned, effectively barred him from playing any further role in UK television. Government regulation prevented newspaper publishers with more than 20% market share from controlling a terrestrial broadcaster. 

These regulations did not apply to companies broadcasting via new satellite technology instead of the existing terrestrial transmitter network. Murdoch took one of the biggest risks of his career to launch his own satellite television station, broadcasting 24 hours a day nationally to the UK. His plan was to offer four channels initially, two offering free entertainment and news, the other two providing movies and sports for a subscription fee. The consensus of opinion within the UK media was that the gamble stood a very high chance of failing. Most observers were convinced that the viewing audience would never choose to pay for television programmes when there were already four strong channels available to them for free. In addition, viewers were obliged to install a new satellite dish in addition to their existing terrestrial aerial. Sharpening the challenge was the arrival of a competitor, BSB, which planned a similar selection of services. BSB was effectively endorsed by the IBA, the UK's broadcasting authority, whereas Sky was generally perceived by the media establishment as an upstart and an outsider.

The factor even Murdoch had not taken into account was the arrival of a severe economic recession shortly after both Sky and BSB launched in 1989 and 1990 respectively. As interest rates rose, both companies began to suffer as the cost of servicing their huge debts spiralled. Worse still, initial public response to satellite television proved lukewarm at best, proving the sceptics right. As a result of the tiny viewing audiences, advertisers too were slow to take the leap. The future of Sky TV, and even of News Corporation itself, was beginning to look very bleak indeed. Luckily for Sky, BSB was the first to crack. Sky took over its competitor in 1990 to become BSkyB. But this only increased the group's costs - the company was reported to be losing £14m a week by the end of that year.

Two things saved Sky. The first was tough new chief executive Sam Chisolm, who cut costs mercilessly, renegotiating contracts to buy programmes cheaper. The second was a bold all-or-nothing deal in 1992 to secure exclusive live broadcasts of Premier League football matches, outbidding terrestrial broadcasters BBC and ITV. Adding to the company's good fortune, the increasing take-up of cable television which also supplied Sky programming into UK homes caused audiences to grow rapidly in 1992 and 1993. 

By 1994, Sky's offering had grown from four channels to almost 20, some branded to Sky, the others joint ventures with US partners. BSkyB floated that year, then Britain's biggest non-privatisation float. The company used part of the proceeds to back a buying spree in the UK sports industry. BSkyB quickly built up a strong portfolio of exclusive sporting broadcast rights, including the dominant position in UK televised football, cricket and rugby, in a series of high price deals. One of the biggest was a £670m deal in 1996 to secure viewing rights for Premier League football for five years.

In order to bolster the output of its sports channels, BSkyB tried to buy UK soccer giants Manchester United for $1bn in 1998. But the deal was subsequently vetoed by regulators. Instead, the company signed strategic alliances with other key football clubs including Chelsea, Leeds United and Sunderland as well as Manchester United, taking small equity stakes and securing media rights. Also in 1998, the group launched the first digital broadcast service in the UK, Sky Digital, and announced plans to switch off its analogue signal by 2002. 

Between 1996 and 1998 Rupert Murdoch attempted to spread his net across Europe as well, forging partnerships with pay TV operators in France, Italy and Germany. In 1997, France's Canal+ acquired a 17% stake in BSkyB in anticipation of a more wide-ranging alliance, but regulatory obstacles and negative French press subsequently got in the way of a deal. Utilities and media conglomerate Vivendi became the ultimate parent of Canal+ in 1998, and began to press for a new deal in 1999. The French group acquired further stakes from other BSkyB shareholders and attempted to broker a merger of Canal+ and BSkyB, but with little success. In Germany, BSkyB acquired a significant stake in Germany's KirchPayTV.

In early 2000, News Corporation announced plans to spin off all of its global satellite television interests in a new business, to be named Sky Global Networks. This entity was intended to take over News Corp's 40% stake in BSkyB as well as its interests in Hong Kong's Star TV and minority stakes in Japan Sky Broadcasting, Sky Latin America, Germany's Premiere, Italy's Stream and Foxtel in Australia. The announcement led to a series of feverish negotiations as both Vivendi and Kirch attempted to add their own broadcast interests into what was expected to be the world's biggest media IPO, set for 2000 or 2001. Vivendi proved particularly aggressive in the negotiations, especially after its own acquisition of Seagram's Universal Entertainment businesses.

In 2001, another general economic downturn and especially a fall in advertising revenues, forced News Corporation to revise its plans for Sky Global Networks. At the same time, the group became embroiled in a long and seemingly fruitless series of negotiations to crown its plans with the purchase of US satellite broadcaster DirecTV. By 2002 financial problems at both Vivendi and Kirch further complicated the Sky Global concept, which was effectively put on hold. However Sky itself continued to perform strongly, hitting its anticipated target of 5m subscribers in 2001, and shutting down its analogue signal early to become a digital-only broadcaster. The group launched its Sky+ Personal Television Recorder at the end of the year as a rival to TiVo. In 2002, another rival broadcaster ITV Digital (originally launched as OnDigital) collapsed under the weight of its massive debts, leaving Sky once again the only serious player in the digital market.

As ITV also struggled with falling advertising revenues and audience shares, Sky pressed ahead with new expansion plans. In 2002 the group scored a major coup in capturing highly regarded Dawn Airey as managing director, Sky Networks, and revealed plans to sharply increase spending on "original content". (Airey left the company in 2007). The group continued to extend its hold on sports coverage in 2003, agreeing a further three-year package for exclusive live rights to all Premier League football matches from 2004 until 2006, at a cost of £1bn. However this led to growing conflict with European regulators who forced the group to sub-license some matches to terrestrial UK broadcasters. The EC also ruled that the Premier League must sell rights to more than one broadcaster after 2006. Later in the year, chief executive Tony Ball, the successor to Sam Chisholm, and widely credited for the successful transformation of Sky into Europe's most profitable pay-TV business, announced he would step down from the company in 2004 at the end of his contract. Despite considerable protest from shareholders and unions, Rupert Murdoch's son James was confirmed as Ball's replacement. In a bid to appease protestors, Rupert Murdoch announced he would remain chairman, but would appoint Lord Rothschild as an "impartial" deputy chairman. 

In November 2006, BSkyB effectively blocked an attempt by cable group Virgin Media (formerly NTL Telewest) to acquire the UK's free-to-air commercial broadcaster ITV by acquiring an 18% shareholding in the latter for around £940m. BSkyB is prevented from owning more than 20% of ITV by cross-media ownership regulations, but the stake gave Rupert Murdoch a significant voice in the future development of terrestrial broadcasting in Britain. Virgin launched an outspoken attack on BSkyB's tactics and called for a regulatory investigation of the purchase. This led to an increasingly bitter war of words between the two companies, which reached new levels when BSkyB sought to renegotiate its arrangement with Virgin Media over carriage of its free-to-air cable channels. Sky's attempts to raise the wholesale price of its service was rejected by Virgin, and when the two sides failed to reach a compromise, Sky switched off supply of the channels in Spring 2007. A savage PR battle ensued, with both sides launching marketing campaigns to criticise the other. see full profile for current activities

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